Voices of the People
Polls Prove Nonprofit Nonpartisanship Is the American Way
Nearly three out of four American voters (72 percent) want to keep current rules protecting 501(c)(3) organizations from the rancor and divisiveness of partisan political activity, according to a new public opinion poll conducted for Independent Sector. Specifically, the survey asked, “Do you think we should change the law and allow charitable groups to participate in partisan political activity,
or should we keep the current ban in place?” The responses also showed there is strong bipartisan support for current law, with 67 percent of Republican voters, 76 percent of Democratic voters, and 77 percent of independent voters expressing support for the current ban on partisan activities. The tax-law restriction prevents charitable nonprofits, religious congregations, and foundations from endorsing candidates or rerouting donations to political candidates. In a joint news release announcing the survey results, Allison Grayson, director of policy development and analysis at Independent Sector, stated that the public trust on
which charitable nonprofits rely “demands that 501(c)(3) public charities remain above the political fray, advocating and informing policymakers but not engaging in partisan political activity.” Agreeing with this assessment, Emily Peterson-Cassin, Bright Lines Project coordinator at Public Citizen, observed, “Politicizing the charitable sector would harm the community trust that those organizations have worked over decades to build.”
The Immediate Spending Confrontation
While the attention in Washington, DC will be focused primarily on the Senate this week, behind-the-scenes activities on a looming federal spending deadline could result in major decisions affecting the ability of charitable nonprofits to perform work in their communities. The Senate and House are both scheduled to leave town at the end of this week for their two-week Easter/Passover recess, giving lawmakers only this week and the last week of April to resolve how Congress will fund the federal government past the April 28 expiration of the current stopgap appropriations bill known as the continuing resolution or “CR.” The Senate Intelligence Committee is scheduled to conduct a public hearing on alleged Russian
tampering with the U.S. elections, and the full Senate could vote on whether to confirm Judge Neil Gorsuch to serve as a Supreme Court Justice. House priorities are somewhat in flux after the Speaker pulled the American Health Care Act – the replacement bill for the Affordable Care Act – from House floor consideration March 24. Staff of the House Ways and Means Committee reportedly are working on details of the forthcoming comprehensive tax reform bill, the next big issue on the congressional and Trump administration legislative agenda. Regarding the April 28 deadline, legislators from both parties appear to be rejecting requests by the Trump administration to add $33 billion for defense and border spending and cut $18 billion from domestic programs for the current fiscal year that ends September 30. Those cuts include more than $7 billion from labor, health, and education, and for Pell grants for low-income college students and National Institutes of Health research. With very few days to reach a considered decision on spending priorities, it is likely that important and effective programs could be adversely impacted as lawmakers race to reach the
- Gift Substantiation Bill Introduced: Recognizing that the Internal Revenue Service should not be encouraging nonprofits to collect social security numbers (SSNs) from donors, Senator Pat Roberts (R-KS) reintroduced the Protecting Charitable Contributions Act of 2017 (S. 587). The legislation would remove the authority of the IRS to adopt alternative procedures for substantiating donations to charitable nonprofits. In late 2015, the IRS used that authority to propose regulations giving nonprofits the option of filing a form with the government identifying donor names and
their SSNs. The IRS withdrew the proposed regulations in early 2016 after receiving nearly 38,000 public comments in opposition to the proposal. The public response included a joint comment filed by 215 nonprofits making the case that the collection of SSNs would “expose the public to increased risk from identity theft, impose significant costs and burdens on nonprofit organizations, and create public confusion and disincentives for donors to support the work of nonprofits.”
- Governments and Giving Regulations: The Federal Trade Commission (FTC) and National Association of State Charity Officials (NASCO) recently hosted Give & Take: Consumers, Contributions, and Charity, a conference to explore consumer protection issues and charitable solicitations. The federal and state government organizers discussed how evolving and new solicitation methods, such as social media fundraising campaigns, crowdfunding, and hybrid businesses, present
unique challenges for regulators. They are working to determine how to apply existing laws and regulations to new giving platforms.
- White House Office of American Innovation: President Trump announced the creation of the White House Office of American Innovation (OAI) to “make recommendations to the President on policies and plans that improve Government operations and services, improve the quality of life for Americans now and in the future, and spur job creation.” The new office, led by White House senior adviser Jared Kushner, will create task forces to focus on initiatives such as implementing regulatory and process reforms and developing “workforce of the future” programs. Every
president since Jimmy Carter has created a regulatory reform panel. Nonprofits may have the opportunity through the OAI to promote regulatory changes that are in the public’s best interest, as well as propose improvements to government grantmaking and other rules that advance the ability of nonprofits to serve communities.
Congressional Action, Inaction Affecting State Policy Agendas
The failure of Obamacare repeal efforts in the U.S. House, coupled with proposed federal spending cuts to domestic programs, are leading Governors to adjust their administrative and legislative goals, while increasing their federal advocacy efforts. A central principle of the failed American Health Care Act had been to end enrollment in expanded state Medicaid plans. Now that the repeal efforts are on hold or dead, some states, such as Georgia and Virginia, are looking to expand Medicaid to
increase health insurance coverage and tap into federal funding that goes with adoption of Medicaid expansion. The Kansas Legislature approved legislation to expand the program, but the Governor vetoed the bill last week; the results of an expected override vote are uncertain. The Governor of Illinois is looking to include more programs under Medicaid to save state money, and Arkansas Governor Hutchinson is considering
adding new restrictions to its hybrid Medicaid expansion.
Governors are also looking at proposed federal spending cuts and speaking up in defense of vital programs that affect the wellbeing of their states. In mid-March, the bipartisan National Governors Association issued a detailed summary of the proposed cuts in President Trump’s initial budget request to Congress, alerting Governors to the potential challenges they will face if defense spending is increased by $54 billion with reductions of an equal amount from domestic programs that are typically funded through the states. In recent days, several Republican Governors have reached out to administration officials to register
their support for existing funding streams. For example, Alabama Governor Bentley expressed his intent to push back against cuts to the Appalachian and Mississippi Delta economic agencies.
As nonprofits look to engage on health care and spending policy issues, it appears that governors may be in greater alignment with reality of domestic needs than the rhetoric during the 2016 election season may have suggested.
Challenges to Nonprofit Property Tax Exemption
… In the Courts
It is too soon to declare that the courts are no longer whittling away at nonprofit property tax exemption rights, but two significant cases suggest that a more sober consideration of longstanding law is still available in the judicial branch of government. A unanimous Massachusetts Supreme Judicial Court decision last month overruled the tax board that had sought to tax portions of church property that were occasionally used for fundraising purposes. The case involved the National Shrine of Our Lady La Salette in Attleboro and whether its incidental use of a cafeteria and maintenance building
constituted charitable use. The court recognized that purposes connected with, supporting, and supplementing the dominant religious purpose of the Shrine are included within the religious exemption, and stated in the decision, "even a church cannot live on prayer alone."
The Illinois Supreme Court threw out a lower-court case that had ruled a hospital property tax provision unconstitutional. In 2010, the state Supreme Court had created confusion in the law by stripping a nonprofit hospital of its property tax exemption because of a sense that the nonprofit did not spend enough on community care. A 2012 law clarified what was required to earn the tax exemption, but last year the state court of appeals ruled the law invalid. The Supreme Court recently ruled that the lower court did not have jurisdiction to hear the case and vacated the problematic decision. A separate court decision in Illinois
had upheld the constitutionality of the 2012 law, meaning that nonprofit hospitals can rely on the statutory community-benefit standard to prove their entitlement to property tax exemption.
Challenges to Nonprofit Property Tax Exemption
… In the Legislatures
State legislators are not waiting for their courts to resolve tax exemption issues and are instead seeking to craft new approaches to longstanding, settled law. On the positive side, legislation in North Dakota would effectively pre-empt future court challenges by declaring any property owned by a religious corporation or organization and used for its charitable purpose to be exempt from property taxation. The legislation would make clear that earnings derived from the provision of goods or services on the property may not be viewed as profits that could otherwise disqualify the property for the
A Massachusetts Representative reintroduced a bill linking property tax exemption to executive salaries. That measure would apply to public charities whose five highest paid employees collectively receive salaries of more than $2.5 million annually, targeting hospitals and universities. Earlier this year, the Montana Legislature rejected a similar measure that sought to remove the property tax exemption for any nonprofit that pays compensation greater than $250,000. Legislation in Maine seeks to
remove property tax exemptions from land held for conservation or public access purposes. Another Maine bill would alter the exemption for property incidentally used to provide goods, services, or materials in exchange for any amount, type, or form of remuneration. The New Hampshire Legislature considered but ultimately rejected a bill that sought to restrict the property tax exemption for nonprofit hospitals to apply only to
the main hospital campus.
Additional Taxes, Fees, PILOTs
- Taxes: A bill filed in North Carolina would exempt most 501(c)(3) nonprofits from paying sales tax on their purchases. Currently, most nonprofits initially pay sales tax, but then may file for semi-annual refunds. Under the proposal, most 501(c)(3) nonprofits (those that are currently eligible for sales tax refunds) would get sales tax exemption certificates that they would use when making purchases to prove they are exempt from paying sales tax. Many others states use a similar process for
demonstrating exempt status. This change, if enacted, is expected to reduce nonprofits' recordkeeping and reporting burdens and would also free up more of nonprofits' financial resources to be used immediately, rather than requiring nonprofits to "loan" money to the state for up to six months while they waited for refunds.
- PILOTs: The Mayor of Yonkers, New York has declared his intention to ask nonprofits to make payments in lieu of taxes (PILOTs) under his city budget proposal. The proposal anticipates payments of 25 percent of what the nonprofit with properties worth more than $1 million would otherwise pay in property taxes if the land did not qualify for the exemption for charitable property.
- PILOTs: The New Britain Herald has this to say to the Mayor of this Connecticut city who has asked local nonprofits to make PILOTs to help close government budget shortfalls: “we don’t believe it makes sense to ask those who already give so much to give even more.” In an editorial, the newspaper highlights how local charitable organizations already “donate to the city — their time, their hard work, their knowledge.” The editors point out that many of “these nonprofits are already squeezed, as state government tightens its budget, and would be even more
squeezed under the proposed Trump budget as grants and reimbursements are reduced or cut to support military spending.”
Finding Unity in Nonpartisanship
The polling data at the top of this edition of Nonprofit Advocacy Matters show that the public opposes proposals to repeal or weaken statutory protections that help keep charitable nonprofits and foundations nonpartisan. But are the vast amount of faith-based and charitable nonprofits of one mind on this issue? And can they articulate WHY they feel so strongly that 501(c)(3) organizations should stay out of politics? Based on several joint statements recently, the answer is a passionate YES!
“Why am I so concerned?” Reverend Stephen Copley, Chair of Faith Voices Arkansas, asked in a joint statement on proposals to repeal or weaken the Johnson Amendment, the provision in federal tax law that protects 501(c)(3) organizations from demands from politicians for endorsements and campaign contributions. He explained, “Our faith communities are not homogeneous institutions politically. When we endorse candidates of one political party or another, then we begin to exclude others in the
congregation. Also, we open the door for the possibility of contributions being made for the express purpose of receiving an endorsement for office. These types of activities are damaging to the religious life of members of congregations.”
Faith Voices Arkansas joined the Arkansas Nonprofit Alliance in sharing the position that nonprofits, whether a church, a human services provider, an arts organization, or other community-based organization, should remain focused on their missions and continue to improve lives without consideration of party politics. Stephanie Meincke of the Alliance shared recent experiences in Little Rock in which nonprofit advocates – “individuals who recently voted for opposing party candidates, both conservatives and liberals” – came together to discuss ways to improve legislation dealing with food deserts. The
question of party affiliation “never came up,” Meincke stated, because “despite their personal, political beliefs, these nonprofit leaders had a shared mission - improve the lives of Arkansans.”
On the West Coast, the California Association of Nonprofits (CalNonprofits) co-wrote a letter to the California congressional delegation with the California Council of Churches IMPACT, making clear the message that there is not a divide among charitable nonprofits in supporting nonpartisanship. Jan Masaoka of CalNonprofits explained: “Churches and nonprofits are trusted in part because we are resolutely nonpartisan. Those
who support our work rely on us to use their donations to help our communities, not engage in electioneering. These proposals would benefit politicians and paid political operatives, not the people and communities we exist as nonprofits to serve.”
The California religious group’s Executive Director, Rev. Dr. Rick Schlosser, shared his organization’s vision: “Moral leadership on issues is fine. It’s also lawful. But engaging in partisanship from the pulpit in the name of a denomination or church renders the church a likely target of campaign cash and political pressure to earn that cash. Independence from partisan alliances is the only sure way to keep the nonprofit’s freedom and authenticity."
Arguing that “If it ain’t broke, don’t fix it,” two Kentucky nonprofit leaders are making the case, “Politicians Should Look Elsewhere for Endorsements and Campaign Contributions.” In the recent joint statement, Danielle Clore of the Kentucky Nonprofit Network, and Rev. Dr. Peggy C. Hinds of the Kentucky Council of Churches, came together to explain that the impact and consequences of
proposals to repeal or weaken the Johnson Amendment go much farther than allowing preachers to endorse candidates from the pulpit, the purported reason for proposed changes. Those harmful consequences explain “why we, along with the vast majority of congregations, charitable nonprofits and foundations, strongly oppose efforts to change the law – endorsing or contributing to candidates, even if by only a few organizations, would destroy the nonpartisanship necessary for nonprofits to effectively solve problems in our communities.”
Clore and Hinds also rebutted other misperceptions about the need to protect nonprofit nonpartisanship, as established in current law:
- “Protecting the Johnson Amendment isn’t a free speech issue – advocacy and candidate endorsement are not the same."
- “Protecting the Johnson Amendment isn’t a religious issue – the implications reach beyond the pulpit."
- “Protecting the Johnson Amendment is not even a partisan issue. For more than six decades, the provision to maintain a neutral playing field has been respected and supported by both parties. While nonprofits may take public policy positions that are favored by one group of elected officials more than another group, candidate endorsement or opposition is detrimental to the neutrality and integrity of the sector.”
They concluded by writing: “Protecting the Johnson Amendment is common sense.”
“Why” is always the fundamental question. Individuals committed to the missions of their organizations – whether faith based or not – have no trouble articulating why nonpartisanship is essential to their missions. Here’s hoping Congress and the administration listen.